Articles Posted inArbitration Agreements

An inspiring development is taking place for victims of sexual harassment in the workplace. Employees who are subjected to sexual harassment at work have faced an increasingly prevalent barrier to getting justice: mandatory arbitration. This has meant that for many employment disputes, the courthouse doors have been closed, requiring employees to instead seek relief through arbitration. Earlier this month, Facebook announced that they will be amending their arbitration agreements to no longer require mandatory arbitration for claims of sexual harassment in the workplace. This move comes on the heels of similar announcements earlier this year by Google, Lyft, and Uber, following a wave of protests by employees who felt that the system of requiring mandatory arbitration of all employment disputes contributed to a pervasive culture of sexual harassment.

Arbitration agreements were disfavored historically. Beginning in England in the 17th century, our legal tradition held that arbitration agreements were freely revocable, up to the point where a dispute was actually subjected to arbitration. This remained the controlling law in the United States up until 1925, when Congress passed the Federal Arbitration Act, signaling a change in how disputes would be resolved going forward. This has gradually led to an increase, and in recent years an explosion, in the prominence that arbitration has played.

Today, it has become the norm for employers to require all new hires to sign arbitration agreements at the start of their employment that bar the employees from suing the employer for any claims arising out of their employment. A 2017 survey of 1,500 employers conducted by the Economic Policy Institute produced some startling statistics showing just how widespread arbitration has become in the workplace. According to the survey, among companies with 1,000 or more employees, 65% have mandatory arbitration provisions. Looking at the employee side, among private-sector non-union employees, 56% are subject to mandatory arbitration. Extrapolated out, that covers over 60 million American workers.

An arbitration award supporting the termination of a Woodbridge teacher for repeated shoplifting has been affirmed by the New Jersey Superior Court and Appellate Division. In this case, Michele Schwab v. Woodbridge Township School District Board of Education, the terminated teacher argued that her shoplifting incidents were caused by a mental health disability and that she should not have been terminated for cause. In rejecting this argument on appeal, the courts have issue another reminder of how difficult it is to overturn the decision of a private arbitrator.

During her sixteen years as an educator, Michele Schwab received awards such as “Educator of the Year” and was frequently described as a highly effective teacher. However, in February of 2015, Ms. Schwab engaged in criminal behavior by shoplifting from a store in the Woodbridge Center Mall. Ms. Schwab’s arrest and the charges against her were later dismissed. More than a year later, she again was charged with shoplifting and pled guilty to the charges brought against her after a video of the act surfaced on social media. The video of her shoplifting that was seen by several of her fourth-grade students. Ms. Schward did not report her arrest to her employer, which the Board of Education claimed is a violation of a district policy.

When the school learned of the charges, Ms. Schwab was placed on suspension pending an investigation. Ms. Schwab’s employer additionally filed tenure charges against her, citing two counts of theft, failure to report her arrest, violation of district policies, and a pattern of unbecoming conduct. The charges were transmitted to an arbitrator for a hearing. After an investigation, the arbitrator decided that the Board of Education had established just cause to discipline Ms. Schwab, and that termination was an appropriate response to her charges.

It is not uncommon for employers to make an employee’s execution of an arbitration agreement a condition of their employment at the inception of the employee’s employment. But what happens when, in the midst of employment, an employer all of a sudden demands an employee’s agreement to an arbitration agreement under the threat of termination? Does an employee have to sign the arbitration agreement in order to remain employed? What if the employee refuses to sign the arbitration agreement and, as a result, is suspended and not permitted to return to work by their employer?

A recent New Jersey Superior Court has held that an employer cannot take adverse employment action against an employee who refuses to sign an arbitration agreement that requires her to waive her statutory rights under the Law Against Discrimination.

In Cator v. Hotel ML/Coco Key West Resort et al., Plaintiff, a black female, had made complaints about race discrimination during the course of her employment. During the same time period, her employer implemented a new policy mandating, as a condition of her continued employment, that all current and prospective employees execute an arbitration agreement. Plaintiff refused to execute the arbitration agreement and waive her statutory rights to have her claims of race discrimination adjudicated in a court of law and by a jury of her peers. In response to her refusal to sign the arbitration agreement, the employer suspended her from work and advised her that she would not be permitted to return to work unless and until she signed the arbitration agreement. As a result, the employee filed a lawsuit for claims under the New Jersey Law Against Discrimination. One of the claims was specifically whether an employer unlawful retaliates against an employee for refusing to sign an arbitration agreement that waives their statutory rights under the law.

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